First, respondents don’t know how to answer it. Look at whatever you are reading this blog on: your computer, your tablet, your phone. If someone walks up to you right now and asks you how much you will pay for it, could you answer that question? This is a product you probably know well, but still can’t answer that question. You don’t know if the market has changed recently, so maybe competitive products have changed. You don’t know if maybe the question is would you pay even more than the normal price?
You don’t know how to answer it, and neither would the people you ask.
Second, respondents will likely play games with you. They want you to believe they wouldn’t pay very much to motivate you to price it lower. Now imagine you walk into a car dealership and show interest in a car. The sales guy comes up to you and says “Let’s not waste time negotiating. How much are you willing to pay?” Surely you will tell him a number lower than you are really willing to pay, hoping to get a better price.
Just like you would game a car salesman, your respondents will likely game you.
If you’ve read this far, you’re now probably screaming at your screen. “OK, I WON’T USE THIS. WHAT SHOULD I USE?”
Unfortunately the answer to that question isn’t simple. There are many techniques for measuring or estimating Willingness To Pay. Each has its advantages and disadvantages. You might start by thoroughly understanding the concepts of Value Based Pricing, and Will I? Which One? Then look up conjoint analysis and Price Sensitivity Meter.
Pricing isn’t simple, but please don’t use the question, “How much would you pay?” Although simple, it just doesn’t work.
Photo by Cowbite